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Nicole Sandford
Partner
Deloitte & Touche LLP

Governance Web Pages:
Reaching Their Potential?

A few early movers see the Web as a good place to tell their governance story.

By Nicole Sandford

When stock exchanges began allowing companies to make certain governance disclosures on their Web sites several years ago, virtually every public company created a section for this purpose. These Web pages are one of a few precious sources for investors seeking to learn about a company’s board and governance practices, and are a common source of information for corporate governance and other ratings agencies.

At a recent committee meeting of the Society of Corporate Secretaries and Governance Professionals, I asked the approximately 50 governance professionals in attendance if they view their Web sites as critical communication vehicles for investors. Nearly three-quarters of them said yes.

Then I asked them to raise their hands if they believed their sites did a good job of conveying their board’s governance processes and practices. Few hands went up.
Several concluded that the time may be right to revisit the sites given the movement toward electronic proxies which will be posted to corporate Web sites.

Recently, I reviewed about 150 governance Web pages of large companies to look for emerging practices, and found more similarities than differences. Most listed board members, basic board and governance policies, committee charters, and other information required by the stock exchange listing standards, but few offered valuable insights or robust disclosures.

However, several unique disclosure practices were found, such as:

Personalized Message: Freddie Mac’s lead director wrote a letter that expressed the board’s commitment to improving corporate governance, and highlighted governance changes related to board structure, financial oversight and disclosure, compliance, and ethical conduct.
Frequently Asked Questions (FAQ): A significant number of companies included FAQs, which varied in length and substance. Aetna Inc.’s detailed FAQ section included such qualitative items such as the characteristics sought by the nominating committee in director candidates and instructions for nominating a director. It also contained a method for directly contacting the presiding director, which is unusual because the communication doesn’t appear to be screened by the company.
Governance Facts and Figures: An increasingly common feature of corporate governance Web pages is the use of “fact sheets.” Home Depot Inc.’s fact sheet includes a year-to-year comparison of items such as board size and policy changes. Microsoft Corp.’s fact sheet included the number of board meetings and financial experts on the audit committee among the many policies, practices, and data it included in the fact sheet.
Highlight Unique Policies: ExxonMobil Corp.’s Web site had one of the more robust governance sections. In addition to a lengthy description of the board’s powers, the company highlighted unique practices, including its position on incentive compensation in the case of restatement, in an interactive format that made it easy to jump to the specific items of interest.

Early movers seem to believe the Web is a good place to tell their governance story. Recent events, such as Pfizer’s much-covered meeting with investors, indicate a trend toward open lines of communication with external stakeholders.

In the context of this environment, it will be interesting to see how governance disclosures evolve beyond simply reporting policies into something more insightful, tailored, and meaningful.

Nicole Silsby Sandford is a partner with Deloitte & Touche LLP, where she leads the Board Advisory Services practice. Ms. Sandford provides consulting and continuing education services to boards on a variety of corporate governance issues. She can be reached at nsandford@deloitte.com.